Highlights of the FY2017/18 Kenya Budget Policy Statement

The Cabinet Secretary for the National Treasury Hon. Henry Rotich, EGH, on March 30th, 2017 delivered a budget statement for the financial year 2017/18 at the National Assembly of Kenya. The theme of the budget is “Creating Jobs, Delivering a Better Life for All Kenyans.”

While delivering the statement, the Cabinet Secretary informed that Kenya’s economy has continued to register robust growth despite the slower global and regional growth. “The economy grew by 5.9 percent, 6.2 percent and 5.7 percent in the first, second and third quarters of 2016 respectively, bringing the average growth for the first three-quarters to 5.9 percent. In 2017, the economy is projected to continue expanding by 5.9 percent” he said.

He further noted that Kenya had made tremendous progress and the budget builds on the transformation that has been achieved so far. In this regard, the Kenyan Government will endeavour to support domestic production and value chains, boost exports, encourage entrepreneurship, continue with business climate reforms, complete on-going infrastructure programs, modernize agriculture and agro-processing, protect the vulnerable and support emerging growth sectors.

The Cabinet Secretary explained that in an effort to reduce obstacles that hinder faster growth of investment, the Government had established a One-Stop Centre (OSC) for investors which will be operational by April 2017. The Government has also established e-regulation and will soon be establishing the e-Opportunities to enable investors interested in Kenya to search for investment opportunities available in Kenya from the comfort of their homes. These initiatives, in addition to the existing Huduma Centres, will provide comprehensive information to investors on licenses, permits, and approvals that are currently offered in a multiplicity of Government agencies located in different parts of the city, further sustaining increased FDI inflows in the country.

The following are some of the Highlights of the 2.6 trillion budget statement:

Business Regulatory Reforms: The Government has significantly reduced the time and cost of opening and operating a business, thus making it easier for investors to start and run a business. This has been achieved as a result of the implementation of measures initiated by the dedicated Business Environment Delivery Unit at the Ministry of Industrialisation, and Enterprise Development. As a result, Kenya moved from position 136 in 2013 to position 92 (in 2016) in the World Bank’s Doing Business Indicators.

Foreign Direct Investment (FDI): Kenya is a preferred investment destination in Africa with many major companies from across the globe starting operations in the country. As a result, Foreign Direct Investment (FDI) has risen from about US dollar 0.514 billion in 2013, to at least US dollar 2.3 billion in 2016.

Per Capita Income: The value of goods and services produced has risen from Ksh 4,745 billion in 2013 into an estimate of Ksh 6,951 billion in 2016. As a result, the per capita income rose from Ksh 113, 210 in 2013 to an estimate of Ksh 152,671. This has made Kenya a lower medium income economy.

Improving National Security: In the past four years, the Government has invested heavily in security in order to make Visitors, Investors, Kenyans and their properties safe and secure. This investment has progressively reversed security threats, especially those posed by terrorism and this has seen the tourism sector make a strong come back with increased employment. In addition, to further secure the country and reduce crime rates, the Government has substantially increased the number of police officers, to more than 98,732 compared to 78,885 in 2013. This has narrowed the ratio of police to the citizens to 1 officer to about 400 citizens, just about the United Nations recommendation of 1 officer to 450 citizens.

Movement of Goods and People: The movement of goods and people around the country has been made cheaper and more effective through expansion of most roads, seaports, and airports. On the Standard Gauge Railway, the Government has constructed a modern railway that will have significant positive spill-over effects on the economy.

Targeting High-Priority Infrastructure: The Government will continue to target high priority infrastructure projects that maximize the welfare of Kenyans. Some of these projects will be funded by donors or under the public-private partnership (PPP) arrangement.

Special Economic Zones (SEZs): The Government has started rolling out Special Economic Zones (SEZs) in key urban areas including Mombasa, Lamu, and Kisumu, as part of the Vision 2030 goal to diversify manufacturing activities, create employment and boost Kenya’s investment profile. Under the SEZs, the Government will provide a host of incentives for industries to operate in and boost the creation of modern urban centers. These incentives include an exemption on VAT, reduced corporate tax rates for a defined period, access to quality infrastructure, and one stop shops for licenses. Once operational, the SEZs will further facilitate importation of necessary raw materials and export finished goods, thriving of agro-industrial activities, and allow for access to regional markets.

The Cabinet Secretary also proposed amendment of the Income Tax Act to exempt dividends payable to non-residents by enterprises operating in Special Economic Zones (SEZ) in order to ensure that foreign investors get a good return on their investment.

Corporate Tax incentive: In order to encourage investors to enter into the housing sector, the Government has maintained reduced corporate tax rate for developers who construct at least 400 units per year. This is to ensure that there is more decent low cost housing for the fast growing demand for houses in the urban areas. The Cabinet Secretary called upon investors to take up this incentive and construct the much needed houses for our people.